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Demand from domestic firms means that Chinese cities represent half of global top 10 ranking, according to research by real estate consultancy JLL
VIETNAM, 6 December 2017 – Asian cities are home to the world's most expensive premium office space at an average of US$111 per square foot per year, higher than the Americas (US$85) and EMEA (US$78).
JLL's latest Premium Office Rent Tracker (PORT) reveals that the market with the most expensive premium office rent in the world is Central in Hong Kong, followed by New York's Midtown, London's West End, Beijing's Finance Street and Silicon Valley in California. However, in a shift from previous editions of the report, Chinese cities now form half of the top 10 most expensive premium office rental locations worldwide.
"China's strong market fundamentals, increasing costs and ongoing demand for premium office space have led to Hong Kong's Central, Beijing's Finance Street, Beijing's CBD, Shenzhen's Futian and Shanghai's Pudong vaulting into the top end of the list," says Jeremy Sheldon, Managing Director, Markets and Integrated Portfolio Services, JLL Asia Pacific. "Together with Delhi and Tokyo-Marunouchi, Asian markets now dominate the world's most expensive premium office rental locations."
"Looking at China, we're seeing companies fill up high-quality completions in Beijing, relieving pent-up demand as they upgrade to better offices. Meanwhile, domestic financial services firms are driving demand in Shanghai's CBD. Established firms in China continue to set up offices in Beijing and Shanghai to extend their national footprint and this will likely drive even more demand for office space," explains Mr Sheldon.
Hong Kong's Central continues to be the world's most expensive office sub-market. At US$323 per square foot per year, rents set corporate occupiers back close to 70 per cent more than for comparable buildings in either New York's Midtown or London's West End.
By contrast, Asia's economic diversity also means that it offers some of the world's most competitively priced premium space, with Kuala Lumpur, Manila and Bangkok comprising the top three most affordable premium office locations globally.
Tech companies are more willing to splurge on premium office space
Asian cities with a strong tech presence such as Beijing (ranked 4th), Shenzhen (ranked 8th), and Tokyo (ranked 9th) have some of the highest premium office rents. Shenzhen, often referred to as China's Silicon Valley, was included in the report for the first time, with Futian district having the highest office rents within the city.
"We continue to see a greater number of companies from the technology sector targeting premium buildings to attract top talent and to enhance their brand image," says Mr Sheldon. "We've observed a significant number of tech occupiers upgrading their premises from serviced to proper offices, and from Grade B to Grade A space in Asia Pacific."
While cost is a key factor, companies selecting their next office location are prioritising access to talent, adds Mr Sheldon.
"Firms are likely to continue focusing on office layouts that have innovative space offerings to make sure they meet employee needs, while driving effectiveness and engagement levels," he says. "This includes providing employees with more flexibility and choice over their working environment. High quality services, from food and beverage to recreation spaces, gyms and space to support well-being, are likely to become standard features in premium locations."
Download the Premium Office Rent Tracker report
In this third edition of JLL's Premium Office Rent Tracker (PORT), we compare like-for-like occupation costs across 54 major office markets in 46 cities. The 2017 edition includes a further 19 markets from 2016, when we included 35 major markets in 31 cities of differing function and evolution.
Premium office rents refer to the 'top achievable' in units over 10,000 square feet (or approximately 1,000 square metres) in the premium building in the premier office district of each city. In tall buildings, the middle zone is used as the benchmark. The report excludes rents that represent a premium level paid for a small quantity of space or highly prestigious units where a significant premium applies.
Total occupancy costs are calculated by combining the net effective rent with additional costs (e.g. service charges, taxes).
The regional average is calculated based on all the total occupancy costs for the 20 tracked markets in Asia Pacific, as per below:
Top 10 most expensive premium office rental locations in the world:
Top 10 most affordable premium office rental locations in the world:
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